Drax, the owner of Britain's largest power station located in Selby, North Yorkshire, has revised upward its performance outlook for the year, citing increased energy demand driven by the recent summer heatwave. The company now expects its adjusted earnings to reach the higher end of the analyst forecast range of £680 million to £711 million. The surge in electricity consumption was largely attributed to households and businesses using more power to stay cool during the extreme weather.
The Drax power station generates approximately 5 percent of the United Kingdom's electricity by burning biomass in the form of wood pellets. These pellets are imported from Canada and the United States and qualify for renewable energy subsidies funded through levies on consumer energy bills. Biomass is classified as carbon neutral under international rules because the carbon dioxide released during combustion is offset by the carbon absorbed during tree growth. However, environmental critics question this classification, arguing that it does not adequately consider the time required for forest regeneration and carbon sequestration.
Looking ahead, subsidies linked to biomass-generated electricity at Drax will begin to decrease next year as running hours are reduced, with support ending entirely in 2031. The company had planned to install carbon capture and storage (CCS) technology on one of its biomass units by next year, but this timeline has now been extended into the 2030s. Drax has indicated that further progress on CCS is contingent upon the government establishing a clear policy framework.
In an effort to diversify its operations, Drax completed a £561 million acquisition of Bluefield Solar Income Fund in July. Bluefield operates more than 250 solar and wind assets across the UK, with a combined capacity of approximately 900 megawatts and a development pipeline nearing 2.9 gigawatts, predominantly consisting of battery storage projects. Chief Executive Will Gardiner characterized this as part of a broader strategy to transform Drax into a more diversified energy company central to the UK’s energy system.
Additionally, Drax is exploring the potential to develop data center facilities on its power station site to leverage its existing grid connections. The company plans to submit a planning application by the end of the year for a 100-megawatt data center project managed by a third party, with a larger 500-megawatt facility also under consideration for development after 2027. Some of Drax’s former coal-fired power station cooling towers, no longer in use, could be repurposed to provide cooling for these data centers.
The company's shares responded positively to the updated outlook, closing 4 percent higher at 852½ pence.